Stay Away from Etsy Stock Now Despite Shares Hitting a New 2-Year High. Short Sellers Are in Control.

• Etsy (ETSY) demonstrates strong technical momentum, maintaining a 100% “Buy” opinion from Barchart.
• Shares are up 36% over the past year and recently hit a new 2-year high.
• ETSY’s fundamentals show flat revenue projections for the next two years, but earnings are estimated to rebound significantly
• High short interest also tempers enthusiasm.

Today’s Featured Stock

Valued at $7.96 billion, Etsy (ETSY)  is primarily an e-commerce service provider. It operates a two-sided marketplace platform called Etsy.com. It allows various merchants to list and sell their unique and creative products belonging to categories like homewares and home furnishings, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and beauty and personal care via its marketplace platform. Its platform enables merchants to manage products and inventory, process orders and payments, ship orders, and build customer relationships seamlessly. 

What I’m Watching

I found today’s Chart of the Day by using Barchart’s powerful screening functions to sort for stocks with the highest technical buy signals; superior current momentum in both strength and direction, Weighted Alpha above 50+ and a 60-Month Beta over 1.5. I then used Barchart’s Flipcharts feature to review the charts for consistent price appreciation. ETSY checks those boxes. The Trend Seeker issued a new “Buy” signal on May 26. Since then, the stock has gained 33%.

Barchart’s Technical Indicators for Etsy

Editor’s Note: The technical indicators below are updated live during the session every 20 minutes and can therefore change each day as the market fluctuates. The indicator numbers shown below therefore may not match what you see live on the Barchart.com website when you read this report. These technical indicators form the Barchart Opinion on a particular stock.

Etsy scored a 2-year high of $87.14 on July 15.

• Etsy has a Weighted Alpha of 65.89.
• ETSY has a 100% “Buy” opinion from Barchart.
• The stock has gained 36.08% over the past 52 weeks.
• Etsy has its Trend Seeker “Buy” signal intact.
• The stock recently traded at $85.95 with a 50-day moving average of $73.35.
• ETSY has made 5 new highs and gained 9.42% over the past month.
• 60-month beta of 1.83.
• Relative Strength Index (RSI) is at 66.25.
• There’s a technical support level around $81.96.

Don’t Forget the Fundamentals

• $7.96 billion market capitalization.
• 29.97x trailing price-earnings ratio.
• Revenue is projected to be slightly down by 3.33% this year but increase again by 3.73% next year.
• Earnings are estimated to increase 59.72% this year and an additional 16.76% next year

Analyst and Investor Sentiment on Etsy

• The Wall Street analysts followed by Barchart give the stock 6 “Strong Buy,” 2 “Moderate Buy,” 21 “Hold,” and 1 “Strong Sell” opinions with price targets between $60 and $92.
• Value Line rates the stock “Above Average" with price targets from $80 to $135.
• CFRA’s MarketScope rates the stock a “Buy” with a price target of $78.
• Morningstar thinks the stock is 15% overvalued with a price target of $70.
• 71,360 investors are following the stock on Seeking Alpha, which rates it a “Strong Buy.”
• Short interest is high at 14.71% of the float with 5.17 days to cover the float.

The Bottom Line on Etsy

Etsy has had growing revenue in the past 5 years, but projections are flat for the next 2 years. Earnings, on the other hand, were down in the past 2 years but are estimated to be up in the next 2 years. It looks to me that the top line has flattened out while earnings have been consolidating. The high short interest is also troublesome. 

If you got it, hold it, but I’d look for stocks with price momentum that are caused by both top- and bottom-line growth.

Additional disclosure: The Barchart Chart of the Day highlights stocks that are experiencing exceptional current price appreciation. They are not intended to be buy recommendations as these stocks are extremely volatile and speculative. Should you decide to add one of these stocks to your investment portfolio it is highly suggested you follow a predetermined diversification and moving stop loss discipline that is consistent with your personal investment risk tolerance.

On the date of publication, Jim Van Meerten did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.